Podcast Summary
Discussing publicly traded companies on social media could lead to personal liability: False or misleading statements about publicly traded companies on social media can result in personal legal consequences, in addition to potential action against the company itself.
Under securities law, making false or misleading statements about a company, including on social media, can result in personal liability for individuals, in addition to potential legal action against the company itself. During this episode, it was discussed that Donald Trump's posts about Trump Media, which seemed to pump the stock, may have violated securities law. This is just one lawyer's opinion, but it highlights the importance of truthful communication, especially when it comes to publicly traded companies. The Securities Exchange Act of 1934 prohibits false or misleading statements in communications related to securities, and individuals can be held accountable for such violations. This is a reminder for everyone to be cautious and truthful when discussing publicly traded companies, as the consequences of false statements can be significant.
Trump's Claims About Truth Social's Size and Success Are False: Despite Trump's assertions, Truth Social's user base is significantly smaller than competitors like Facebook and YouTube, with fewer than 10 million unique users monthly.
Donald Trump's statement about Truth Social being a "very solid" and larger platform than competitors like Facebook or YouTube is materially false. The platform, which is now publicly traded under the name DJT, has under 10 million unique users every month, according to the speaker. Trump also claimed that he's being canceled from other platforms and cannot regain access, but as the leader of the Republican Party, he has the power to return if he chooses. These statements, according to the speaker, are misleading and false. Despite Trump's assertion that Truth Social is "very solid" with over $200 million in cash and zero debt, its user base pales in comparison to larger social media platforms.
Trump Media's Financial Struggles and Insider Payments: Despite substantial losses, Trump Media paid large sums to insiders, raising concerns about financial health and potential conflicts of interest.
Trump Media, a publicly traded company led by Donald Trump insiders, reported substantial losses in 2023, raising doubts about its ability to continue as an ongoing concern. Trump's own independent auditor, Ben Borger, expressed these concerns in a recent report. Devin Nunes, the current leader of Trump Media, was paid $750,000, Dan Scavino received $220,000 and a $2.2 million promissory note, and Kash Patel was given a $120,000 consulting contract. These large payments to insiders, combined with the company's financial losses, have raised questions about the company's financial health and potential conflicts of interest. In contrast, MD Hearing, a sponsor of this podcast, offers high-quality, affordable hearing aids, allowing more people to access this essential technology. The founder of MD Hearing, an ENT surgeon, saw a need for affordable hearing aids and made it his mission to provide them. My uncle, a personal example, is thrilled with his MD Hearing aids and is now more present in family gatherings because they work effectively.
Companies' public statements could lead to securities law violations: Companies must exercise caution with public statements, especially during lawsuits, as false or misleading denials could result in securities law violations
Companies need to be cautious with their public statements, especially when facing lawsuits. A recent court case in the District of Massachusetts ruled that a boilerplate denial of the merits of a lawsuit could be considered a securities law violation if the statement is found to be false or misleading. This means that companies could be held liable for making public statements that dismiss the accusations against them, even if those statements are common and routine. This ruling highlights the importance of discretion and accuracy in public communications, particularly for publicly traded companies. It's a reminder that every word matters, and that companies should avoid making definitive statements about the merits of ongoing legal matters. Instead, they should focus on providing factual information and avoiding making promises or guarantees about the outcome of the litigation. So, whether you're running a business or just listening to the news, remember that words have power, and it's essential to use them carefully.
Using social media to disclose material info could violate SEC regulations: Avoid using personal social media to exclusively disclose material company info to prevent potential SEC violations and financial damages
Using social media exclusively to disclose material information to investors could potentially violate SEC regulations, such as Regulation FD. Regulation FD requires companies to distribute material information in a manner that is broadly and nonexclusively accessible to all investors to prevent selective disclosure. Social media platforms are suitable methods for communicating with investors, but restrictions on access or lack of awareness about the latest news on those platforms could lead to violations. If materially false statements are made on social media that induce investors to buy or sell stocks, the damages could be significant, potentially resulting in financial losses for the company and its executives. The SEC has clarified in a 2013 press release that the intent of Regulation FD is to ensure all investors have equal access to material information at the same time. Therefore, using a personal social media platform to exclusively disclose material information could put a company at risk of SEC enforcement action and financial damages.
Risk of Lawsuits for False Statements in DJT: Publicly traded companies like DJT face lawsuits for materially false statements affecting their valuation, potentially resulting in damages from hundreds of millions to billions of dollars.
With Trump Media and Technology Group (DJT) being a publicly traded company, there is a risk of lawsuits for materially false statements affecting its valuation. If such statements cause significant financial damage, shareholders could file class action lawsuits against the company and potentially its board members, including Donald Trump. These lawsuits could result in damages ranging from hundreds of millions to billions of dollars. The Securities Act of 1933 and 1934 sets these regulations, and the government isn't the only one who can file these lawsuits. This is just one lawyer's opinion, but given the current situation, it wouldn't be surprising to see such lawsuits emerge. As a reminder, this discussion is not meant to provide stock advice or legal counsel. Instead, it highlights the importance of accuracy and transparency in publicly traded companies to avoid potential securities violations.
